European Regulators Need More Powers to Police Crypto

European regulators demand more oversight powers to reign in burgeoning cryptocurrency market Regulators argue current regulations must be beefed up to combat online scams, unauthorized services and stablecoin risks.

"Enhanced powers for the detection and blocking of fraudulent websites, the freezing of crypto assets when there are reasonable grounds to suspect market abuse or terrorist financing" said the European Securities and Markets Authority, or ESMA.1The proposals recommend powers for the competent authorities to have access to crypto asset customer accounts and trading platforms.

ESMA also said it wanted greater powers to take action against crypto firms that are not based in the EU and target European investors without the required approval under MiCA. The supervisor said having more tools would enable authorities to act more rapidly and harmoniously and limit firms' chances to take advantage of diverging national rules.

The call also comes as the EU looks at a potential move to give centralized oversight of the crypto industry. A draft law from the European Commission would shift the authorization, supervision, and oversight of crypto-asset service providers to ESMA from the regional regulators. The powers would potentially include on-site inspections, investigations, fines, and the power to suspend or ban certain crypto services.

Centralized advocates maintain that crypto markets are naturally international, operating on internet-based platforms that can simultaneously serve customers in multiple countries. Having a single regulator could better allow the manager to observe the activities happening in different countries and plug gaps left when national authorities regulate firms independently.

And the problem has grown as MiCA has been implemented in full across the bloc. The regulation stipulates crypto firms providing services to European consumers must be duly authorized, and regulators are still determining how well they can enforce the law on overseas platforms.

There are also proposed revisions to rules on stablecoins. ESMA has asked for clear guidance prohibiting regulated crypto companies from providing services in stablecoins not compliant with MiCA. Policymakers are looking at how digital assets may change as they become more integrated into traditional markets as tokenisation and other blockchain-based services expand.

The EU Commission is currently revising MiCA and has also delayed its targeted consultation until 30 September, inviting industry participants, public authorities and other relevant stakeholders to comment on whether the regime still fits the bill.

The discussion could set the tone for the future of European digital-asset regulation, especially on the scope of EU oversight compared to national authorities, as the markets become more synchronized.